‘Perfect storm’ causing constant delays at Air Canada, despite windfall profits: CEO

MONTREAL –

A “perfect storm” of issues lies behind Air Canada’s wave of flight delays over the summer time, its CEO mentioned, even because the nation’s largest airline roars again to profitability — with no signal of slowing down.

Despite extra employees and revamped know-how, Air Canada’s operations in June and July failed to satisfy “expected levels,” Michael Rousseau informed analysts on a convention name Friday.

The chief govt recognized “severe weather” — thunderstorms, specifically — and “global supply chain issues” as among the many culprits.

Tardiness and cancellations have particularly plagued Air Canada’s giant community of regional flights, run by Jazz Aviation. Rousseau pointed to a pilot scarcity, which he boiled all the way down to a number of elements: new carriers similar to Flair Airlines and Lynx Air competing for labour; stricter laws on shift size, “which causes all airlines in Canada to add 10 to 15 per cent more pilots to fly the same schedule”; and dwindling enrolment at flight colleges through the COVID-19 pandemic.

“We have this almost perfect storm that exists at this point in time,” Rousseau mentioned. “We’re working hard with our partner, Jazz, on solving that problem right now … but it will take some time to transition.”

In spite of tens of hundreds of flight delays in its second quarter, Air Canada posted earnings that soared to pre-pandemic ranges amid sturdy journey demand and pricier fares.

It reported internet revenue of $838 million final quarter in contrast with a lack of $386 million a 12 months earlier — and practically a billion {dollars} in losses by means of all of 2022. Revenues grew greater than a 3rd to $5.43 billion, a document for the second quarter.

“Traffic and yields were incredibly strong, especially in international markets,” mentioned TD Cowen analyst Helane Becker in a observe to purchasers.

High demand propelled greater than 11 million prospects throughout Air Canada’s routes within the quarter, Rousseau mentioned. Analysts additionally famous greater ticket costs led to thicker revenue margins. Passenger numbers grew 23 per cent year-over-year, whereas passenger revenues jumped 42 per cent — a disparity that speaks to the hike in fares.

Across main Canadian airways, home ticket costs dropped 17 per cent from 2019 ranges in June by means of August — to $323 on common for a one-way fare — particularly on the busiest routes, in response to journey information agency Hopper. But many regional flights in addition to worldwide ones outdoors the United States noticed fares shoot up — by 18 per cent to $593 for Mexico and Central America, 30 per cent to $1,166 for Europe and 99 per cent to $2,065 for Asia.

At Air Canada, advance ticket gross sales rose to $5.7 billion from $5.3 billion three months earlier, with no indicators of dropping off, the corporate mentioned.

Canadians’ urge to journey remained unbridled by constant delays throughout the airline’s community, with half of the provider’s flights routinely arriving late or cancelled outright over the previous two and a half months.

The firm ranked final amongst North America’s 10 largest airways for on-time efficiency in July, in response to a report by aviation information agency Cirium this week.

Its planes arrived punctually 51 per cent of the time, versus 62 per cent for WestJet — in seventh place. Alaska Airlines, which had the same variety of month-to-month flights to Air Canada’s 36,000, snagged the highest spot at 82 per cent.

“Running the system hard — when things go wrong, they tend to cascade,” mentioned Barry Prentice, who directs the University of Manitoba’s transport institute, suggesting Air Canada’s capability is stretched skinny.

Charlene Hudy, who heads the Air Line Pilots Association’s Air Canada contingent representing 4,500 workers, mentioned the provider is “falling short” on operations.

“We are very frustrated by those delays,” she mentioned in a cellphone interview.

Hudy, whose union opted to kickstart the bargaining course of in June by ending its 10-year collective settlement a 12 months early, known as on the corporate to shut an “unacceptable” pay hole between Canadian pilots and their American counterparts — partially to carry down attrition charges.

Last quarter, Air Canada shelled out 24 per cent extra year-over-year on employee compensation, as a consequence of 22 per cent progress in its full-time-equivalent workers, the corporate mentioned. A 31 per cent plunge in jet gas costs from a 12 months earlier helped offset the associated fee.

With a watch towards smoother site visitors circulation, Rousseau as soon as once more known as on the federal authorities to overtake the monetary mannequin for airports, which depend on passenger charges to function and pay lease to Ottawa — a system that failed when the stream of travellers dried up.

“The pandemic really has exposed the weakness of our user-pay model,” Rousseau mentioned.

While U.S. airports ramped up operations earlier and by no means stopped receiving federal funds, Canadian ones took longer to renew post-pandemic exercise and had much less money to do it with, mentioned Prentice.

In the quarter ended June 30, Air Canada reported that working revenues climbed 36 per cent to $5.27 billion from $3.98 billion in the identical interval a 12 months earlier.

On an adjusted foundation, diluted earnings hit $1.85 per share versus a lack of $1.12 per share a 12 months prior, the Montreal-based firm mentioned Friday. The newest determine towered over analyst expectations of 68 cents per share, in response to monetary markets information agency Refinitiv.

Air Canada’s whole long-term debt and lease liabilities fell 9 per cent to $14.89 billion from $16.31 billion on the finish of 2022.

Its internet debt-to-adjusted earnings ratio dropped to 1.7, a serious enchancment from 5.1 six months earlier.

This report by The Canadian Press was first printed Aug. 11, 2023.